GREED

The world is now in an unprecedented economic crisis. May I list what I see as the basic reasons for how it started.....

The number reason is simple - GREED. The Bible said "The love of money is the root of all evil", and indeed it is the root of all the mess happening to us today.

Some years back, the Wall Street executives found that it was very lucrative to sell mortgages to the sub-prime market, people who couldn't really afford to buy houses. It was making so much money for the banks that they started to resell these loans to other banks to raise more funds. Everyone knew this was a bubble, but who cares? Make money while you can. Greed.

Since everyone was making so much money then, the world is flushed with cash. And these money is looking for somewhere to invest to make even more money. So the banks hired army of managers to sell all sort of financial products to the people. Many structured products surfaced. Greed.

Companies begin to build new buildings and cities. People spent and buy like crazy. Factories rolled out products. Prices of raw material like oil, steel and corn, began to increase. Greedy companies then bought more raw materials to hoard them so as to sell them at higher prices. This created even more supply shortage. Speculators attacked the commodities, and the prices skyrocketed. The rising prices encouraged even more people to invest in new properties and infrastructures. So people borrowed more money to invest more. Leverage is the order of the day. Greed.

However, when American housing prices finally collapsed, many people cannot service their loans. Foreclosures were then the natural consequence. The subprime mortages then becomes toxic assets. Banks with subprime collapsed. Banks which lent to banks with subprime also collapsed. Stocks prices dived.

American consumers are losing their homes, so who can afford to spend on other things like car, clothes, toys, etc? Suddenly consumer demand went into free-fall. Companies who have been ramping up productions suddenly finds that their stockpile were stuck. Manufacturing companies are into trouble. Layoffs striked. The trouble cascaded to other sectors like transportation, services, and one by one, everyone is grabbing with falling credit and demand.

Don't the American ever learn? It was only less than 10 years ago while they created the Dotcom bubble. And now they created bigger one which brought the whole world down with them. Greed.

What were Washington and the Fed doing? Those fellas believed in letting free markets run, and minimal intervention. I think the truth is, the Bush Republican government probably have some vested interest in the game, and thus let Wall Street run it course. The bubble is now so apparent, and yet how the smartest people in Washington and Wall Street now see it then? Greed.